MICROECONOMICS presentation Essay Example | Topics and Well Written Essays - 750 words

MICROECONOMICS presentation - Essay ExampleBarriers to Entry. The air hose industry operates in a highly dynamic environment and is affected non only by the legal, technological and economic environment but also by the global environment. Government restrictions and high degree of competition act as entry barriers in the airline industry. However the biggest entry barrier is the gargantuan cost involved in setting up and running the traffic. The acquisition of aircrafts, implementation of adequate surety measures, deployment of skilled manpower and rendering the desired level of customer service entail huge financial resources. The high cost of entry however does not deter organizations with sound business models and adequate financial resources to enter the business. The Australian domestic airline industry, after its deregulation in 1990, has seen the entry of many players separately catering to different customer segments. There have been firms that have flourished (Virgin Au stralian Airlines) and there have been firms that have perished (Ansett Australia). Competitive strategies. In addition to the general business environment, companies are also affected by the competitive strategies adopted by rival firms. ... An example of the differentiation could be an airline (Qantas) which provides bells and whistles in its service and charges a high price. Likewise, there could be another airline (Tiger Airways) with a no frills service. It is important to note here that these two airlines are targeting distinct customer segments. As such, the high price charged by the airline offering value added services (e.g. in-flight entertainment, free wine) in addition to the core service of transportation does not induce the other airline, which offers trimmed down services, to increase the price. Game Theory. There may be instances where more than one firm is competing for the same target market for e.g. two airlines (Jetstar and Tiger Airways) trying to capture the p rice-sensitive customer. The competitive strategies employed by one firm and reactions thereof by the other firm are trump understood with the help of the game theory. In the world of business game theory finds applications in research and development expenditure, pricing, new product introduction, strikes, negotiations etc. A managers decision in each of these settings depends on the decisions that other players in the industry will take. As such, the payoffs in these setting can state to be interdependent. In the discussion about the airline industry, one may fathom three different outcomes co-operative game, non co-operative game and a situation of no interdependence. The airline may get together and form a cartel (cooperative game) and operate as if they were a monopoly. In such a case the dominant system of each firm would be high price and neither would be compelled to reduce the price because of the implicit co-operation. This is the most logical game when the industry